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GuruFocus has detected 6 Warning Signs with Flex Ltd $FLEX.
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Flex Ltd (NAS:FLEX)
Beneish M-Score
-3.00 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Flex Ltd has a M-score of -3.00 suggests that the company is not a manipulator.

FLEX' s Beneish M-Score Range Over the Past 10 Years
Min: -6.74   Max: 1.16
Current: -3

-6.74
1.16

During the past 13 years, the highest Beneish M-Score of Flex Ltd was 1.16. The lowest was -6.74. And the median was -2.51.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Flex Ltd for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 0.8657+0.528 * 0.9903+0.404 * 1.0274+0.892 * 0.9665+0.115 * 0.9145
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1776+4.679 * -0.0702-0.327 * 0.9968
=-3.00

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $2,163 Mil.
Revenue was 6114.999 + 6008.525 + 5876.813 + 5772.698 = $23,773 Mil.
Gross Profit was 416.455 + 313.691 + 405.995 + 406.337 = $1,542 Mil.
Total Current Assets was $8,614 Mil.
Total Assets was $12,803 Mil.
Property, Plant and Equipment(Net PPE) was $2,322 Mil.
Depreciation, Depletion and Amortization(DDA) was $600 Mil.
Selling, General & Admin. Expense(SGA) was $1,003 Mil.
Total Current Liabilities was $6,878 Mil.
Long-Term Debt was $2,798 Mil.
Net Income was 129.469 + -2.508 + 105.729 + 61.344 = $294 Mil.
Non Operating Income was -3.09 + -8.388 + -3.529 + -1.481 = $-16 Mil.
Cash Flow from Operations was 469.636 + 279.62 + 263.932 + 196.673 = $1,210 Mil.
Accounts Receivable was $2,585 Mil.
Revenue was 6763.177 + 6316.762 + 5566.248 + 5951.6 = $24,598 Mil.
Gross Profit was 452.467 + 396.916 + 352.341 + 378.817 = $1,581 Mil.
Total Current Assets was $8,957 Mil.
Total Assets was $13,050 Mil.
Property, Plant and Equipment(Net PPE) was $2,240 Mil.
Depreciation, Depletion and Amortization(DDA) was $518 Mil.
Selling, General & Admin. Expense(SGA) was $881 Mil.
Total Current Liabilities was $7,152 Mil.
Long-Term Debt was $2,741 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2162.75 / 23773.035) / (2584.909 / 24597.787)
=0.09097492 / 0.10508706
=0.8657

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1580.541 / 24597.787) / (1542.478 / 23773.035)
=0.06425541 / 0.06488351
=0.9903

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (8613.622 + 2321.536) / 12803.049) / (1 - (8956.604 + 2239.921) / 13049.518)
=0.14589423 / 0.14199705
=1.0274

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=23773.035 / 24597.787
=0.9665

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(518.179 / (518.179 + 2239.921)) / (600.231 / (600.231 + 2321.536))
=0.18787535 / 0.20543425
=0.9145

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(1003.132 / 23773.035) / (881.411 / 24597.787)
=0.04219621 / 0.03583294
=1.1776

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((2797.984 + 6877.757) / 12803.049) / ((2741.474 + 7152.271) / 13049.518)
=0.75573725 / 0.75816938
=0.9968

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(294.034 - -16.488 - 1209.861) / 12803.049
=-0.0702

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Flex Ltd has a M-score of -3.00 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Flex Ltd Annual Data

Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15Mar16
DSRI 0.95081.38450.5811.35120.9140.95611.01371.15320.86510.9367
GMI 0.99281.15431.03180.81930.90711.07611.04550.8970.93340.8975
AQI 0.94280.89740.26810.54170.75021.0181.59061.06471.08422.0798
SGI 1.23321.46171.1230.77911.17971.03170.80321.10771.00150.9339
DEPI 1.13440.77690.97890.91511.38680.89870.97211.22460.82191.1047
SGAI 0.9571.00841.08031.00580.8861.06091.14230.98070.96391.2108
LVGI 0.97511.14011.46190.96970.99060.98530.9661.05340.96840.9945
TATA 0.0125-0.0621-0.6506-0.0733-0.009-0.0304-0.0747-0.0621-0.0212-0.052
M-score -2.25-2.04-6.25-2.98-2.52-2.60-2.75-2.55-2.71-2.48

Flex Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.91990.88040.86510.7941.09791.15480.93670.97620.93580.8657
GMI 0.84670.90890.93340.92570.90720.88370.89750.90040.95640.9903
AQI 1.24681.20151.08421.06151.61972.03762.07981.97631.28121.0274
SGI 1.14641.09081.00150.92990.91810.91370.93390.98640.98240.9665
DEPI 1.03740.84690.82190.86660.9871.05661.10471.04830.89070.9145
SGAI 0.85380.87080.96391.05551.10241.15121.21081.18241.20261.1776
LVGI 0.97790.97470.96840.97820.99640.99050.99450.98770.98760.9968
TATA -0.049-0.0138-0.0158-0.0565-0.05-0.0392-0.052-0.0438-0.0511-0.0702
M-score -2.60-2.53-2.68-3.03-2.51-2.26-2.48-2.40-2.75-3.00
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